They say a rising tide lifts all boats. U.S. personal spending climbed 0.6% in April, the biggest gain in five months. But prices are also going up on many big-ticket items like homes and cars, which could derail what President Trump recently described as “the best economy… EVER.”

The average new vehicle loan amount hit a record $31,455 in the first quarter, according to Experian’s State of the Automotive Finance Market Report. The monthly payment for a new vehicle climbed to $523, also a record. Meanwhile, the average interest rate for a new vehicle was 5.17% during the quarter—an increase of 31 basis points vs. a year ago.

The report also states that average car loan length for new vehicles increased during the quarter to a little more than 69 months. While 72-months remains the most common loan term—nearly 24% of the market vs. just over 10% in 2008—more new loans have spilled into the 85-to 96-month length.

“What happens in auto finance affects the whole consumer credit industry. The real issue is affordability because that changes what people buy and how they buy,” Melinda Zabritski, Experian, senior director of automotive financial solutions, said at a recent event hosted by the American Financial Services Association (AFSA) and the National Association of Consumer Credit Administrators (NACCA).

“The average American can’t afford a new car,” Zabritski said, noting the average per capita income in the United States is $31,000, the same figure as the average new car loan.  

New Car Sales Are Down

Higher loan amounts and rising rates are making even the extra-long loans difficult for many consumers. That’s led to a downward trend in new vehicle sales recently, a trend industry analysts expect to continue.

“The dream of owning a new vehicle is becoming more elusive to the average American,” said Melinda Zabritski, Experian, senior director of automotive financial solutions. “To reverse the trend, dealers and lenders need to better understand the data and explore different options to make new vehicle ownership accessible and appealing. Traditionally, lenders’ risk tolerance has swung back and forth like a pendulum, and right now we’re seeing a more risk-averse side. But if payments continue to improve, we could see credit standards loosen.”

Making Ends Meet

The people that appear to be impacted the most from the rise in auto lending figures are from the subprime (501-600) and deep subprime (300-500) credit tiers. New vehicle loans among the subprime and deep subprime consumers decreased 8.4% and 14.1%, respectively, in the first quarter vs. a year earlier. Meanwhile, new vehicle loans to prime (661-780) and super prime (781-850) consumers reached 73.4%, the highest first-quarter level since 2012.

This article originally appeared on the Experian Blog.

 

Matt Tatham is the manager of content insights and data analyst at Experian Consumer Services, a division of Experian, the nation’s largest credit bureau.